Five from Sutter County arrested in false-employment scam [The Sacramento Bee, Calif.]

May 02--Five individuals from Sutter County were arrested Tuesday in connection with a false-employment scam that has drained millions of dollars out of government coffers via sham unemployment and disability claims.

The five, along with another Sutter County resident not yet arrested, are charged in a criminal complaint filed Monday in Sacramento federal court.According to a 78-page affidavit of an investigator for the U.S. Department of Labor, an audit and analysis of records at the California Employment Development Department have thus far "revealed over 2,000 (unemployment and disability) benefit claims that are indicative of fraud filed in connection with this scheme. Not all of these claims resulted in benefits being mailed out, but according to EDD claim records, the loss to the government as a result of this fraudulent scheme currently exceeds $5 million."

The audit and analysis are not yet complete and, according to U.S. Attorney Benjamin Wagner, that figure may rise.

Unemployment insurance is federally funded and administered by the state. Disability insurance is state funded with payroll deductions.

Seven companies formed by the defendants purport to be farm labor contractors providing workers to harvest various agricultural crops in Sutter and Yuba counties, Wagner said.

However, he said, undercover operations by a number of confidential sources showed that these businesses were in fact selling never-paid wages to hundreds of individuals in Northern California. The defendants charged an individual approximately $250 for each $1,000 in phantom wages, which would be reported to the EDD. The purchaser of the fictitious wages, who never performed any work for the defendants' companies, would then claim to be laid off and file for unemployment benefits, disability benefits, or both.

Arrested Tuesday were Mohammad Nawaz Khan, 56, and Iqila Begum Khan, 31, both of Live Oak; and Mohammad Shahbaz Khan, 56; Gurdev Kaur Johl, 67; and Kewal Singh, 74, all of Yuba City. Also charged in the complaint but not arrested is Mohammad Adnan Khan, 32, of Live Oak.

In initial court appearances Tuesday, U.S. Magistrate Judge Kendall J. Newman ordered Singh released on his own recognizance, and Johl released on a $50,000 unsecured appearance bond co-signed by his daughter. The other three were held pending hearings on detention today.

When interviewed by EDD, the individuals who claimed to have worked for the defendants' companies would oftentimes not know where they worked, or the name of their supervisor. Sometimes they would report earnings that greatly exceeded the norms for the area. Many of the employees reported by these companies were between 50 and 70 years old and claimed that their duties consisted of picking peaches and harvesting walnuts, physically demanding labor.

In his court affidavit, the Department of Labor special agent wrote: "Throughout this investigation, the subjects have used the same name "Mohammed Khan" when convenient and have used their middle names only when it benefited them. They used each other's addresses. ... They ... have repeatedly and over a period of decades hired and laid off each other from work to ensure they can receive unemployment and disability from the state. The companies which they claim to operate employ hundreds of people every year who are never seen and a majority of which go on to file for (unemployment) benefits, (disability) benefits, or both. Payroll taxes are paid sporadically, if at all, and never in full."

Call The Bee'sDenny Walsh, (916) 321-1189.

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